An Australian surfer is recovering after being dragged under the water by a shark that sliced his leg open then circled him as he screamed for help in a scene witnesses said was "like Jaws".

Tattoo artist Glen Folkard, 44, was catching waves off Redhead Beach, near Newcastle, north of Sydney, when the two-metre (6.5 foot) shark attacked on Wednesday afternoon in front of dozens of stunned swimmers.

Witnesses said the shark took a large chunk out of Folkard's thigh as well as his board before dragging him under.

He managed to shake himself free and with the help of fellow surfers paddled back to shore trailing blood as the shark circled and was Thursday stable in hospital after surgery.

"It was kind of like Jaws, you know, the scene at the start... where everybody's pulled out of the water and it's a hot day and the water's inviting," a witness, named only as Peter, told the Sydney Morning Herald.

"My son actually said he saw the shark leap out of the water and grab a fish. The word is it was a bull shark.

"His (Folkard's) skin was really grey, he obviously lost quite a lot of blood."

Bull sharks are a medium-sized species known for their aggression and tendency to attack humans.

Around 500 people were on the popular family beach at the time, with about 100 in the water, reports said.

Another witness, Tony James, said: "It's just hit him and took him under for a bit.

"He's managed to get to the surface but I saw it start to follow him."

Rescue helicopters began air patrols after the attack and spotted several large groups of sharks nearby with beaches in the area indefinitely closed.

Sharks are a common feature of Australian waters and there have been a string of sightings along the New South Wales coast this summer as warm waters draw schools of fish closer to shore.

But fatal attacks are rare, with just 27 people killed in the past 22 years.